Micro Combined Heat & Power (CHP) Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The micro combined heat & power (CHP) market is expected to grow at a CAGR of 18.14% during the forecast period. Factors such as low natural gas prices and increasing concern towards carbon emissions along with supportive government policies are expected to drive the number of installations of micro CHP systems across the world. Although several efforts have been made over the years to remove technical and regulatory barriers and to have higher adoption of micro CHP systems, factors such as higher installation cost compared to conventional heating systems are likely to hinder the market growth during the forecast period.

Key Highlights

• Biogas-based micro CHP systems are expected to witness significant growth during the forecast period.
• The Office of Fossil Energy, under the US Department of Energy, has announced nearly USD 30 million in federal funding for cost-shared research and development projects for small-scale solid oxide fuel cell (SOFC) systems and hybrid energy systems. The funding seeks to develop advanced technologies for the SOFC hybrid system using solid oxide electrolyze cell technologies. Such steps to develop fuel cell technology is likely to be adopted in the fuel cell micro CHP systems and would create an opportunity for the market to grow in the near future.
• Asia-Pacific is likely to dominate the market during the forecast period, with the majority of the demand coming from the Japan and China.

Key Market Trends

Biogas-based CHP Systems to Witness Significant Growth

• Over the past few years, the biogas industry has grown significantly. Biogas combustion is a carbon-free process, as the resulting CO2 is previously captured by the plants being combusted. Biogas micro CHP can be a very useful technology for sites that have a constant demand for both heat and electricity, particularly when the site is off the primary gas grid, and where biomass fuel is readily available.
• With growing consciousness and government initiatives, facilities such as biogas micro CHP are increasing significantly. Considering the fuel mix in CHP plants, the share of renewable and waste (including biogas) has grown over the years and is estimated to have a share of around 30% in the year 2018.
• Biogas has multiple sources of production such as crop residues, animal manure, municipal solid waste, municipal wastewater, and woody biomass. As of 2018, crop residue in the Asia-Pacific region has the highest production potential of around 80 Mtoe.
• Moreover, abundant resources and supportive government policies are enabling the biogas market to expand in Northern Europe, the United States, and countries producing sugarcane bagasse (e.g., Brazil). The proliferation of small projects, including digesters for off-grid applications, is recorded in both OECD and emerging economies. This, in turn, is expected to have high biogas production and would support having a broader biogas based micro CHP market in the near future.

Asia-Pacific to Dominate the Market

• Asia-Pacific is the largest market for micro CHP in the world and is expected to continue to maintain this dominance during the forecast period as well. The region’s micro-CHP market is mainly dominated by Japan and few emerging countries, such as China and South Korea.
• In Japan, in recent years, fuel cell-based micro-CHP have become a widely preferred form of heat and electricity generation in residential and commercial segments, such as hotels, public facilities, hospitals, Institutions, to incur power savings and for reliable energy supply.​ The sales of micro-CHP by Ene-Farm program began in 2009 in the country, much ahead of the rest of the world.
• Apart from a shift toward grid-independent power generation, favorable government policies are also a major driver for the adoption of micro-CHP in the country. Foreign Direct Investments and special measure laws for new energy use were implemented to fasten the growth of the CHP market in Japan.​ Also, in the wake of the Tohoku earthquake and Fukushima nuclear crisis, the Japanese government is promoting the industrial CHP system as safer and cost-effective electricity generation. Hence, these are the major factors driving the micro-CHP market in the country.​
• Japan implemented one of the most successful fuel cell commercialization programs, the Ene-farm program, in 2015. As of 2019, the program led to the deployment of about 306,000 fuel cell-based micro-CHP systems, of which around 90% were in the residential sector. Each system has up to 5 kW of capacity. The country plans to deploy about 5.3 million of these residential units by 2030. ​

Competitive Landscape

The micro CHP market is moderately fragmented. Some of the key players in the market include Vaillant Group, Viessmann Group, Yanmar Holdings Co. Ltd, M-Trigen Inc., EC Power A/S, TEDOM A.S, 2G Energy Inc., BDR Thermea Group, Marathon Engine Systems, and SOLIDpower Group.

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